‘Growth impossible without stable power’

Many businesses have gone under because of irregular power supply.Those that are alive suffer from underutilisation. According to the Group Managing Director, Elephant Group, Mr Tunji Owoeye, stable power supply is central to economic stability. In this interview with DANIEL ESSIET, Owoeye argues that the economy will perform better in such an atmosphere.

Nigerians have said raising the national debt limit is unhealthy for the economy. What do you think?

If there is a genuine reason to raise the debt limit, we have to, and if it is to finance infrastructure, I think it is okay. But, if we are raising a debt instrument to finance deficit in budget, that would be criminal because a debt instrument should be for activities that will impact positively on the economy as done in other countries. Raising a debt instrument to finance infrastructure is okay.

How can the government reverse the slow down of the economy?

There are several things the government can do. The first is to confront insecurity because security is key to economic stability. Also, infrastructure have to be put in place. Economic growth is propelled by factors, such as infrastructure, good roads, transport system, power and the likes. They are necessary infrastructure that can propel growth. I really feel the government is not doing badly in trying to address these issues, but, it needs to fix the bureaucrats in the system to ensure that policies are actually followed up in terms of implementation. From electricity to transport infrastructure,the economy is being held back by limited capacities.The general wave of insecurity can lead to economic instability. The issues are of importance to the economy and its prospects for achieving a higher level of growth and delivering prosperity to the people. These are barriers to greater productivity and growth of the economy. Economies are integrated systems that can only function smoothly when certain conditions are present. Reinvigorating the economy will require progress in some areas, including electricity generation, infrastructure, and trade policies. It is impossible to speed up economic growth without a fast-growing and fairly reliable electricity supply. Achieving rapid real Gross Domestic Product (GDP) growth will require concerted efforts to increase the supply and reliability of electricity. The economy will perform better and faster in an environment characterised by rapid growth, buoyant internal demand, and improving infrastructure and governance. However, there are worrying signs in terms of security and the role of the government is critical. The nation’s development is being constrained by the legacy of chronic underinvestment over many years. Infrastructure has suffered from decades of neglect and underinvestment. The crippling negative effect of electricity generation capacity and transport infrastructure on the country’s economic competitiveness, is obvious. The continued capacity of transport infrastructure is essential to maintain growth. But I feel the administration is doing something in these areas.

Agribusiness is increasingly being viewed as a dynamic area to invest in. With tremendous shifts in food consumption, rising input costs, and food safety concerns, the changing landscape of agribusiness has become complex. How do you cope as an operator?

Like businesses in all industries, agribusinesses battle for land, labour, capital, and finance. This has become more complex in response to the greater variety of goods and services transacted. Managing investments carefully is a critical capability, especially in a volatile and unpredictable economy where sudden changes in the competitive landscape and in regulatory definitions can dramatically impact supply and demand. Players in the sector grapple with rising input costs and intense margin pressure. All are vulnerable to climate change. Large scale international investments especially acquisition of agricultural land, continue to raise concern. Agribusiness is the same all over the world, but some of us that have been privileged to work in different countries have seen that agribusiness is practised in the same structure and if you look at the challenges of agribusiness and other businesses, you will find out that the challenges are similar. Other than the financing structure that is a bit different in agriculture, most of other challenges are similar to those seen in other businesses. In Nigeria for instance, across the value chain, we, the business people with long years of experience, have our own strategies of mitigating the challenges that we meet. The major problem we have as a company and a private sector is the difficulty to have long-term plan because of the environment we are in. Other than the inability to plan long-term, I do not think that what we have here is different from what is in other parts of the world.

What about financing of the sector?

The effort of the Governor, Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi, is commendable in ensuring that banks shore up their capital. If you look at some countries, they are still looking at increasing and shoring up their capital. The government has made it mandatory for local banks to increase their capital to a minimum of N25 billion. This was done some five years back with the mergers and acquisition that took place in the second phase of that fiscal review. It has been a plus for the economy and an advantage for the business environment. This means that businesses are able to access more facilities and support from the local banks, but this may also not be the best today because for agribusiness you need a long tenure. What the government has done in the area of agro input is giving guarantees to local banks to support agro input suppliers across the value chain. This is also an additional support and security to increasing agribusiness. Apart from the effect of the government’s effort and the local banks that have increased their capital, there are also international banks in Nigeria with vast experiences and capacity to give long tenured facilities to support agribusi-ness. So, if you look at the combination of all these developments, I think we are in a better position than we were some 10 years back, but what I know is that it can still be better.

Is rice business fundamentally focused on large scale farmers?

Generally, most rice farms are owned by small producers. Rice farming is still small. There are few commercial farmers. Agricultural finance is needed to create the supporting infrastructure for adoption of new technology, building major and minor irrigation projects, rural electrification, installation of fertiliser and pesticide plants.This is to help small farmers. At the last count, according to the Rice Millers Importers Association, we have about four commercial rice farmers in Nigeria. This is not sufficient. The incentives being packaged by the government, I think, should be attractive for commercial farmers. We need both the commercial farmers and the small farmers to meet the huge demand of the rice industry.

What can you say about the sector’s preparations for natural disaster?

The unfortunate incidence of flooding that ravaged most parts of the country last year in Nigeria also affected the value chain, especially the rice farmers. Their rice farms were washed away, but the good thing is that most of the farmers have mobilised back to the farm and the government had also introduced an incentive of giving them fertilisers through the Growth Enhancement Scheme (GES) fertiliser distribution. There have been ad-hoc responses to the flooding that we witnessed. Moving forward, what we are doing as an association and as an industry group, is to ensure that we move our farmers in the value chain, advising them to take farms in other states that are under-utilised to reduce their risk and avoid this kind of reoccurence in future. However, the policy of the government since the commencement of the administration, has been impressive. We have seen some seriousness in the policy as regards rice self-sufficiency. This is giving us some confidence in attracting and seeking for additional investment in the rice industry. We have several of our members who have taken up commercial farming-investing in rice processing mills and other investments but additional commitment of the government can only get better for the rice industry.

Despite the persistent outcry of genuine rice millers, smugglers have continued with their illegal act, which cost the government huge sums of money in lost revenue. What is your experience?

If you follow the trend in the industry in the last six months, the government has increased taxes and duties from 30 per cent to 50 per cent and from 50 per cent to 100 per cent levy on January 2013 with duty of 10 per cent summing up to 110 per cent. We support the initiative of the government because we know the purpose is to discourage importation to boost local production. But we should be mindful of the fact that as we increase our levies and taxes, it gives the smugglers more room to operat, especially through the corridors of Benin Republic whose economy is solely dependent on Nigeria’s economy. The only way to tackle smuggling is sincerity and willingness of the government to police the borders with stakeholders, such as the rice processors, and importers to give relevant information about routes that are porous, which they are supposed to man. I am sure that with the collaborative efforts of the agencies of the government, operators and stakeholders in the rice industry in Nigeria, we are sure to reduce smuggling. But I am not sure we can stop it permanently. We can reduce it to the point that it will not negatively impact on the investment of the local industry or on the budget and revenue of the government. I am sure with time, smugglers will know that Nigeria is not a country to toy with in this respect. For now, we salute the courage of the Controller-General of Customs and his men because in the last two months, they have made significant seizures of smuggled rice into the country. They are always pledging to assist us and they have promised to continue to assist us by policing our borders effectively to put a stop to these smuggled rice.

Are there quality criteria for producers?

We don’t have any. I do not want to speak in languages that Nigerians will not understand, but try to break it down as much as possible. The basic quality any consumer is looking out for in rice is the nourishment, colour and the long grain nature meaning that Nigerians are used to long grain rice. We are also used to rice that will not have many foreign particles, such as stones and in as much as we can fix all of these in the country, why import rice? In terms of quality and nourishment, the Nigerian rice is of high quality compared to imported rice but in terms of preparation and attraction, they are not as attractive as what we import. In Nigeria, we do not like to eat short grain rice, we want long grain rice and these things can be fixed with the kind of machines our members use for production. The environment and other things are being improved upon on daily because if you look at some of the machines, our members have imported and installed for production, they are the latest machines that are better than the old machines that give out the broken rice. The machines that we now use to remove the shaft to make the rice clean are all improved versions with better technology. I believe that as time goes by, we can only improve on the quality of the kind of rice we produce in Nigeria and in no distant future, we should be able to compete with other countries such as Thailand, Pakistan and the rest. We have to fix the border to stop the influx of poor quality rice. The agency responsible for ascertaining and confirming the quality of rice, must carry out their operations vigorously in the land borders and unapproved routes, because when they get into our markets, they impact negatively on the health and safety of Nigerians and that is why we are saying that the government should take it much more seriously in ensuring that we do not have smuggled rice through the land borders.

What about certification of rice processors for export?

Let me take you through the statistics. Nigeria consumes in excess of five million metric tonnes of rice per annum much less than 50 per cent of what is produced locally. We are unable to meet our own demand not to talk of export. In terms of certification, there are laws and agencies that certify the quality of food production. We have the National Agency for Food Drugs Administration and Control (NAFDAC) and the Standards of Organisation of Nigeria (SON) with duties to ensure that once goods are produced, they conform with the standards and laws of the country and this has not changed. I am sure that these agencies have always been doing their duties. Most of the rice you see in Nigeria have very high nourishment level. I do not think we have problem of certification, the problem we have is that of packaging, quality of the grain of the rice and cleaning. If we can fix all of these, I see no reason why imported products should be patronised anymore in this country.

What are the labour problems and working conditions in the rice industry?

The same labour challenges we have in other industries. The problem of cultivation and production of rice is much peculiar because most of the youth do not believe that they can make a living through agriculture. This has to be corrected by creating infrastructure and we are encouraging our outgrowers to plant rice and most of our millers are buying from them at commercial prices. So, the moment they can see that there is a future for them, that their rice paddy will be bought by millers at competitive rate, I think it will be an encouragement and that is being pursued.

Smuggling is getting worse by the day. What impact is it having on the industry?

If we do not fix smuggling, there cannot be a rice development programme. Fixing smuggling is key to the right development plan of the government and also key to the rice self-sufficiency scheme of the government. I will tell you why. If we do not fix the problem of smuggling, people that have invested in the rice industry will not get their returns on investment. For imported rice especially, those that are being smuggled into the country. In Benin Republic, the government looks at the duty that Nigeria brings and tries to bring it below what we pay in Nigeria, they can bring it down to even less than 10 per cent to get some income. They make smugglers to pay next to nothing duty giving them an edge over producers here who will have to buy the paddy, employ labour and incur cost in processing and packaging of the rice. The costs are many and until we fix the issue of smuggling, we will not get any significant rice development in Nigeria.

How many jobs can the rice food value chain create if smuggling is tackled?

Directly, close to six million jobs and indirectly nine million jobs. When I say directly, in the value chain we have farmers, farmer cooperatives, millers and processors, marketers and importers and in the value chain, there are a lot of people across the country. The farmers sell their products to the buying agents and the agents sell to the processors and the processors to the distributors, so you see the chain and across this value chain, you have close to eight million people for employment.

What about the impact of the ban on rice importation?

In the last two years, there have been serious positive impact on consistent production and cultivation of rice because of the ban on rice import from land borders. Production of rice has increased since the ban. Before now, there was a factory whose capacity utilisation was about 25 per cen, but has risen to 35 per cent. It will continue to increase as long as we fix the issue of smuggling of rice perpetually.

What is the response from the National Assembly?

We met with the Senate Committee on Agriculture and we got the assurance of the Senate to support the fight to stop smuggling of rice into the country. We met not long ago, but are yet to see the impact of that meeting. We are seeing the impact through the Nigeria Custom Service and we want them to do more. They have stepped up security at the borders and also the waterways. Nigeria is a very big country and we have so many unapproved routes. Even from the North the Customs have to expand their networks to police smuggling and also partner stakeholders in the industry to provide vital information to curb this act. We expect them to do much more.

We suggest that the Federal Government meet with that of Benin Republic and hint them about the negative effect of smuggling on our economy and the initiative of developing our products. If they do not cooperate, the government will have no choice than to shut our borders. Though this will be against the Economic Community of West African Countries (ECOWAS) treaty, if they fail to respect the trade understanding, the government will have to take a step forward to enforce sanction and I think that will send the right signals to them that Nigeria means business.

What of the Save our Soul (SOS) message to the President?

As an association, we want him to ensure that the policies given out in the budget are meticulously carried out and there should be consistency. He should also make the environment safe and encourage stakeholders who have invested in the country.

Pakistan and Thailand seem to have the largest share of the world rice trade. When will we get there?

Thailand has been serious in the production of rice over the centuries. It is not about catching up with other countries, but being self sufficient and I think with the right collaborations with Rice Importers Millers, Distributors Association of Nigeria (RIMIDAN) and other stakeholders in the industry and with commitment to creation of the right environment to operate, we should be able to achieve self-sufficiency in rice production in the next five years.